Japanese Strick Oil Off the China Coast

A Japanese venture has struck oil in the first drilling test in Bohai Bay, raising hopes for early production of what are believed to be vast hydrocarbon resources in China's offshore waters.

Officials of Japan China Oil Development Corp., which has exclusive rights to drill in a portion of the bay near Tianjin, said workers opened what could be a major well producing at least 10,000 barrels of oil daily.

The officials said production could begin as early as 1984 after work crews complete tests in other parts of the bay, which forms a pocket along China's northeastern shoreline west of Korea.

"Right now we can only say there is oil in that one place, but it looks very promising," said Keiji Sahara, a company geophysicist. "That single well is likely to produce at least enough to make production feasible."

Other officials in Tianjin said their optimism has been fueled by hitting oil on the first drilling site, an unusual development in oil exploration. They say either they are unusually lucky or they are drilling in an unusually rich oil zone.

The well was sunk about 80 miles from shore in the center of a 7,700-square-mile zone awarded to the semi-governmental Japanese outfit last May in China's first contract for joint development of its offshore oil. The contract calls for sharing of costs and output, with the Japanese managing exploration and production.

As a pilot project, the offshore drilling in Bohai Bay is considered vitally important both for Japan, which imports almost all of the oil needed for its huge industrial sector, and for China, which is counting heavily on its potential petroleum reserves to finance its ambitious modernization program.

Chinese officials have estimated that if the nation can export 365 millon barrels of oil a year by 1990 -- which would be quadruple the size of 1979 exports -- oil revenues could pay for 23 percent of the expensive technology and equipment China would buy from the West that year.

China, now ranked the world's 10th-largest oil producer, put out 771.5 million barrels of crude oil last year. But the rate of recovery from its main oil fields has declined in recent years, and only modest gains are expected in the near future. In fact, last year's output was 0.2 percent lower than in 1979.

Despite optimistic forecasts for its offshore resources, Peking has been slow to develop the potential, partly because of its longstanding policy of self-reliance and rejection of sophisticated technical equipment and know-how from the West.

In recent years, however, Peking has invited foreign oil companies to conduct seismic testing of its offshore areas and has promised to draw up blocks of potential oil fields for bidding among firms interested in joint development contracts.

A high government official recently said that Peking will open bidding for offshore blocks in the latter half of this year. The bidding is expected to be mainly in the South China Sea and Yellow Sea, where numerous oil companies, including at least 10 American concerns, recently completed seismic surveys.

One area that will not be open for bidding is Bohai Bay, where Chinese oil officials hope to produce 146 million barrels a year by the mid-1980s. The concession awarded to the Japanese in the South and West Bay is said to contain as much as 2 1/2 billion barrels.

In addition to the Japanese contract, Peking carved out a zone in the North Bay for a French venture that entered in a similar joint venture arrangement with China last year. Drilling has not yet begun in the 3,500-square-mile French zone, officials said this week.

Drilling began in late March in the Japanese portion of the bay, company officials said. Setting up a single "jack-up," or high-legged rig in shallow water, the crew drilled 3,800 feet before hitting oil earlier last month.